(Fortune Magazine) -- Not since the late 1980s has the world of private equity so entranced Wall Street. The deals are huge ($33 billion for hospital chain HCA), and the investment
dollars continue to pour in (new record: Blackstone closed a $15.6 billion fund in July). Lost in the hoopla, however, are the unmistakable signs of a top - signs that have industry
insiders plenty worried.

One neon-red flag was the recent decision of Wilbur Ross, a savvy market timer who has called turns in basic commodities like coal and steel, to sell his own firm, W.L. Ross &
Co., to Amvescap for $375 million. Ross, who will continue to manage the firm, says he's delighted to have a deep-pocketed new partner and denies trying to time the private-equity
market.

Big funds, big deals

Eight of the ten biggest U.S. private-equity deals have been proposed since 2005. Here are the top five this year.

HCA

Announced July 24 $32.7 billion. It's the largest offer of all time, but the board will hear other bids until mid-September.

Kinder Morgan

Announced May 29 $26.5 billion. Skyrocketing gas prices have made Kinder's pipelines very valuable assets.

Albertson's

Closed June 2 $17.4 billion. Its new owners have already shut 100 of the grocer's 600 stores.

Univision

Announced June 27 $13.6 billion. Rival Televisa, originally outbid, is mulling a higher offer.

Aramark

Announced May 1 $7.7 billion. The stadium food vendor's shareholders want more from the CEO-led buyout offer.

Sidebar rankings by DEALOGIC

But in the next breath he acknowledges that it certainly does feel like a top and offers up a "worrisome data point": One large European lender says the multiples of the
private-equity deals in its portfolio are 50% higher than five years ago.

Buyout funds raised a staggering $131 billion last year, double the total in 2004, and are on pace to exceed that figure this year. But success in raking it in is followed naturally
by an urgent need to put it to work - and that's where the trouble starts.

Cyclical returns

"Historically, this looks a lot like 1987 and 1998," says Steven Kaplan, a professor at the University of Chicago's Graduate School of Business who studies private equity and venture
capital. Buyout firms suffered tepid returns on the investments they made in those years.

Today, Kaplan says, "the industry is coming off a period of excellent performance, which is typically when a lot of money flows into private equity-which historically is followed by
poor returns."

Buyout veterans-while denying their own vulnerability, of course-point to the industry's increasing pack mentality as an area of concern. Not only do private-equity firms tend to
invest over and over in the same kind of deal - mattress makers, yellow-pages directories, and private education companies have been all the rage - but they're working now with more
partners, a phenomenon known as a "club deal." (The seven firms that banded together to buy SunGard Data Systems last year for $11.7 billion set an informal record.)

Sharing deals in this way ostensibly spreads out the risk. Yet the mutual reinforcement of group buying can also increase the likelihood of overpaying. ("If KKR, Blackstone, and
Carlyle all think it's a fair price ...")

But perhaps it is the rising brazenness of private-equity ventures that seems most troublesome. Look no further than the poor public-market performance of Burger King (Charts). Its former private-equity owners at Bain
Capital, Goldman Sachs, and Texas Pacific Group paid themselves plenty for "fixing" the burger chain (including a $367 million "special dividend").

But the stock is down 20% from its IPO price in May. And its first-quarter earnings results (which included a $30 million "breakup fee" and a $33 million "make whole" payment to the
buyout firms) disappointed investors with lackluster sales.

Predicting a market top, needless to say, is always fraught with danger. And there are some signs of restraint. In the late '80s, deals were often structured so that annual interest
expenses on the debt and the amount of free cash flow a company generated were about equal-like spending one's entire after-tax income on mortgage payments.

Today, says KKR partner Marc Lipschultz, interest coverage is usually a much more manageable two-to-one ratio or higher. And those private-equity dollars have a wider canvas on which
to play: Once largely a U.S. phenomenon, the buyout business has undeniably gone global. All the major firms have opened offices in Europe. Asia is next.

One player who figures to win no matter how things shake out is Ross, whose specialty is buying distressed properties - an art that would benefit from a private-equity meltdown. While
snapping up failing firms requires relatively less capital, Ross points out that the bigger the initial deals, "the more distressed capital you need." Ah, the joys of capitalism. No
matter how bad it gets, someone will always profit.